Qingdao Double Star Makes a Big Price for the Purchase Why Korea Kumho is Still Not Achievable

In this regard, Qingdao Shuangxing public relations told reporters that there is no new response to this issue Qingdao Double Star, the company's latest news of the acquisition is still on April 24 released "Qingdao Double Star became the ultimate purchase of Kumho tires."

Qingdao Double Star Group

The relevant person in charge of the market department of Kumho Tire (China) stated that the acquisition was handled by the Korean headquarters. It is not clear in details. At present, China's business has not been affected.

Qingdao Twinstar’s acquisition of Kumho Tires has attracted the attention of the industry. In 2015, CNPC acquired Pirelli, an Italian tire company, for a price of 7 billion euros, becoming a symbol of the growth of Chinese tire companies. However, if Qingdao Shuangxing’s acquisition of South Korea's Kumho tires succeeds, it will become the second largest acquisition of Chinese tire companies for overseas companies. . However, judging from the current situation, reaching an agreement from both parties depends on the distance.

Qingdao Double Star 2016 Financial Report

Qingdao double star to small broad?

In early 2016, there were rumors that the nine largest Korean banks (creditors with a 42.01% stake in Kumho Tires) wanted to sell shares of Kumho, including companies such as Apollo India, Yokohama Tire of Japan, and Qingdao Twinstar. Among them, Kumho Tire and Japan Yokohama Tire also have a cooperative relationship.

In March 2017, Qingdao Double Star won the competition, and the seller signed a “Share Sale and Purchase Agreement” on behalf of the Korea Development Bank. Under the precondition that the agreed conditions were met, Korea acquired 955 billion won (approximately 5.9 billion yuan). The development bank and its other sellers held a total of 66.66 million shares of Kumho Tire, accounting for 42.01% of the total number of shares issued by Kumho Tire.

Qingdao Double Star stated in its statement on April 24: “Even if we have control of Kumho Tire, we will maintain the independent operation of Kumho Tire and actively promote the renewal of Kumho Tire and existing employees.”

According to reports, the data show that in 2015, in the global market, Kumho Tire’s share was 1.7%, ranking 14th, and Qingdao DoubleStar’s share of 0.5%, ranking 34th; if the acquisition was successful, Qingdao Doublestar’s The ranking will rise to tenth, surpassing the China Rubber Group to become China's largest tire company.

According to the 2016 annual report of Qingdao Double Star on April 28, last year, the company realized operating income of 4.928 billion yuan, an increase of 64.6% from the previous year. The net profit attributable to the shareholders of the listed company was 95,338,900 yuan, a year-on-year increase of 55.6%. It has achieved substantial growth for three consecutive years.

Qingdao Double Star stock prices in January

Kumho tires that have been losing money year after year

Although Qingdao Shuangxing performed well last year and has reached an agreement with the seller’s representative, it is obviously not very reluctant to purchase Kumho Tire for the current situation.

As early as last year, when Kumho Tire’s largest creditor’s shareholder decided to sell 42% of Kumho Tyre’s shares, Kumho Hana Group Chairman Park San-keung had already taken action and wanted to raise funds through related channels to repurchase the company, but until When the exercise of the right of pre-emption expired, Park San-chuang failed to raise a deposit. The Kumho Tire's refusal to use Qingdao Qingdao Double Star to use its brand name marks a deadlock in the negotiations.

Around 2000, Kumho Tire began to gradually expand globally, but strategic mistakes including over-investment led the company to a cash crisis. In the economic crisis in 2009, the company sold most of its equity to the bank in order to avoid bankruptcy.

However, Kumho Tire's crisis has not been lifted. Data shows that in 2015, Kumho Tire’s operating revenue was 3 trillion won (approximately 18.22 billion yuan) and net loss was 67.4 billion won (approximately 400 million yuan). According to the Yonhap News Agency, in the first three quarters of 2016, sales of Kumho Tire fell 4.4% year-on-year to 2.16 trillion won (about 13.11 billion yuan), and the loss amounted to 54.9 billion won (about 330 million yuan).

Since the CCTV “3·15” party was exposed to the issue of refining in 2011, Kumho Tire has faced some negative news in the Chinese market. Although Kumho Tires did not release its relevant operating data in China, Qingdao Double Star stated in its statement that “Kumho China is one of the most serious markets in Kumho. Double Star will take full advantage of the double star after acquiring Kumho Tire. The status, advantages and influence of the Chinese market, as well as experience in corporate transformation and smart manufacturing, as soon as possible to restore the normal production and operation of Kumho China tires, and strive to build Kumho Tire into a high-end brand in the Chinese market.”

With the acquisitions nowadays, the ultimate direction of this acquisition is still unpredictable. However, it can be seen that the problems faced by Kumho Tire have not been solved, and even if the equity acquisition is successful, there will still be challenges in achieving profitability in the future.

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